In June 2015, the Financial Conduct Authority announced its Smarter Consumer Communications initiative, designed to improve the way firms interact with customers.
The project was designed to ‘bring about a change in the way information is both communicated and delivered to consumers’. It also aimed to give firms ‘the freedom to communicate with their customers in a more flexible and open way’ – potentially paving the way for more innovative delivery.
In October this year, the regulator released a Feedback Statement setting out its plans, alongside a Policy Statement outlining changes to disclosure requirements in its Handbook. Our blog, What’s the latest on the FCA’s Smarter Consumer Communications looks at this in more detail.
Changes to disclosure documents
As part of this, the Authority has announced that it’s doing away with the templates for its initial disclosure document (IDD), the combined IDD (CIDD) and the services and costs disclosure document (SCDD).
These documents have, up to now, been central to the regulator’s aim of improving the disclosure of vital information. Their intention was to raise consumer awareness of cost and service.
What do the changes mean in practice?
The templates are being abolished – but this doesn’t mean that the information contained in them does not need to be disclosed.
It simply means the use of the IDD, CIDD or SCDD will not be allowed in their present format.
So the template documents themselves will disappear. Firms will still be able to use the same layout, but without using a Keyfacts logo.
Previously, the documents provide a handy checklist of information that needed to be disclosed. The new approach does away with this.
In part, this is due to the regulator’s stated aim to move compliance away from being a ‘box ticking’ exercise. It is keen to move towards an approach where good governance is embedded within firm culture.
Firms need a greater understanding of the COBs requirements
Without a checklist, compliant disclosures will rely more on firms fully understanding and following the requirements set out in the regulator’s COBS (Conduct of Business Sourcebook), ICOBS (Insurance Conduct of Business Sourcebook) and MCOBS (Mortgages Conduct of Business Sourcebook).
Will this be good for consumers?
Without clear guidance to follow, there is a concern that the changes will have the opposite effect, and lead to firms not giving consumers all the information they require – even if they have the best intentions.
And because there is no single document in which to share the essential information, important details may be spread among a range of documents – which could lead to accusations that firms are hiding key details among other information.
A drive for innovation?
As we touched on at the start, it’s possible to read the regulator’s desire to give firms ‘the freedom to communicate with their customers in a more flexible and open way’ as an open door for more innovative communications.
The FCA has been vocal about its support for innovation – in terms of products and their delivery – via its Project Innovate and associated initiatives.
Removing the prescribed document templates potentially opens the door to communications via other media. However, the current requirement for information to be provided via a ‘durable medium’ may restrict the levels of innovation possible here. It’s expected that the FCA will consult on this in 2017, so watch this space…
More onus on firms to do the right thing
The removal of the templates can be seen as another step in the FCA’s journey towards firms that proactively self-govern, and away from a regulator that is overly prescriptive.
In many ways this is a good thing, giving firms more autonomy to decide how they want to comply with the regulations.
But removing templates and making requirements less strict, less ‘tick box’ means that firms have to think for themselves when it comes to ensuring their communications meet the Authority’s requirements. And most importantly, that they deliver effectively for consumers.
If you are reassured by a checklist approach to good governance, you will find our Financial Promotions Checklist helpful. It clearly details the steps you need to take to ensure your marketing and communications materials are compliant.
The checklist is free, and you can download a copy here.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.